Question 1

In order for any given commodity to be considered money,it has to

Accepted Answer

A)  be issued and controlled by some government institution.
B)  have some intrinsic value.
C)  be generally acceptable as a means of payment.
D)  be convertible into gold or silver.
E)  be used in barter transactions.

Question 2

The part of a bank's reserves that are larger than desired are called

Accepted Answer

A)  required reserves.
B)  non-required reserves.
C)  excess reserves.
D)  additional reserves.
E)  unnecessary reserves.

Question 3

A credit card is

Accepted Answer

A)  barter money.
B)  fiat money.
C)  not money,but the card's credit line is money.
D)  money.
E)  not money.

Question 4

In performing which of its primary functions does money solve the problem of the double coincidence of wants?

Accepted Answer

A)  Money supply
B)  Unit of account
C)  Medium of exchange
D)  Barter system
E)  Store of value

Question 5

Open market operations are when the Reserve Bank buys or sells

Accepted Answer

A)  gold.
B)  corporate securities from the government.
C)  government securities from the government.
D)  corporate securities from banks or some other business.
E)  government securities from banks or some other business.

Question 6

An official measure of money in Australia is M1,which includes the sum of

Accepted Answer

A)  currency plus credit card transactions.
B)  currency plus traveller's cheques plus cheque account deposits plus small time deposits plus money market funds and other deposits.
C)  currency plus traveller's cheques plus time deposits.
D)  currency plus current account deposits.
E)  current account deposits plus small time deposits.

Question 7

As the nominal interest rate increases,the opportunity cost of holding money ________ and the quantity of money demanded ________.

Accepted Answer

A)  increases;increases
B)  decreases;decreases
C)  increases;decreases
D)  increases;does not change because people need money
E)  decreases;increases

Question 8

When the Reserve Bank changes the quantity of money,there is an immediate effect on

Accepted Answer

A)  the price level and the inflation rate.
B)  the nominal interest rate.
C)  the inflation rate but not the price level.
D)  real GDP.
E)  the price level but not the inflation rate.

Question 9

As the opportunity cost of holding money increases,people can

Accepted Answer

A)  find a better job.
B)  do nothing.
C)  try to maximise marginal benefit.
D)  seek substitutes for money.
E)  increase the demand for money but not the quantity of money they hold.

Question 10

The Australian dollar is called

Accepted Answer

A)  faith money.
B)  convertible money because the government stands ready to convert it into gold or silver.
C)  commodity money,because it is convertible into gold.
D)  frail money because it is ruined by wear and tear.
E)  fiat money because the law decrees it is money.

Question 11

If the currency drain ratio is 0.2 and the desired reserve ratio is 0.03,the money multiplier is

Accepted Answer

A)  3.23.
B)  0.76.
C)  5.22.
D)  6.67.
E)  4.46.

Question 12

As a lender of last resort,the Reserve Bank

Accepted Answer

A)  makes loans to individuals in need.
B)  makes loans to banks when the entire banking system is short of reserves.
C)  makes loans to banks that are short of reserves.
D)  makes loans to the government.
E)  None of the above.

Question 13

Money serves as a

Accepted Answer

A)  means of payment,legal obligation and public tax.
B)  means of settling debts,transaction lubricant and private commodity.
C)  means to conduct barter transactions.
D)  medium of exchange,unit of account and store of value.
E)  means of worker exploitation and capitalist enrichment.

Question 14

If the price level increases,the

Accepted Answer

A)  demand for money does not change and the quantity of money demanded does not change.
B)  demand for money increases.
C)  quantity of money demanded increases.
D)  demand for money decreases.
E)  quantity of money demanded decreases.

Question 15

The opportunity cost of holding money is the

Accepted Answer

A)  risk of being robbed.
B)  the number of trips you make to the bank to manage your money.
C)  forgone interest on an alternative asset.
D)  higher tax rate you pay.
E)  trouble you have balancing your cheque book.

Question 16

When the Reserve Bank buys government securities,the immediate effect of the purchase is that banks'

Accepted Answer

A)  reserves increase.
B)  assets increase.
C)  deposits increase.
D)  reserves decrease.
E)  loans decrease.

Question 17

What is a problem with barter that makes it so difficult to use?

Accepted Answer

A)  Barter omits the store of value role for money.
B)  Barter requires the use of only fiat money.
C)  Individuals have to produce something to trade with.
D)  Barter is very efficient but illegal because it avoids taxation.
E)  Barter requires a double coincidence of wants.

Question 18

In the money market,in the short run if the quantity of money exceeds the quantity of money demanded,then to achieve equilibrium the

Accepted Answer

A)  demand for money increases.
B)  price level rises.
C)  inflation rate increases.
D)  supply of money increases.
E)  nominal interest rate falls.

Question 19

The function of money that helps assess the opportunity cost of an activity is money's use as a

Accepted Answer

A)  barter tool.
B)  unit of account.
C)  store of value.
D)  medium of exchange.
E)  store of debt.

Question 20

If the desired reserve ratio is 10 per cent and there is no currency drain,then a $100 increase in the monetary base leads the banking system to increase the quantity of money by

Accepted Answer

A)  $1,000.
B)  $110.
C)  $1,100.
D)  $400.
E)  $900.

Exam 10: Money,the Price Level and Inflation

If the desired reserve ratio is 10 per cent and there is no currency drain,then a $100 increase in the monetary base leads the banking system to increase the quantity of money by

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The function of money that helps assess the opportunity cost of an activity is money's use as a

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As the nominal interest rate increases,the opportunity cost of holding money ________ and the quantity of money demanded ________.

Correct AnswerverifiedShow Answer

What is a problem with barter that makes it so difficult to use?

Correct AnswerverifiedShow Answer

When the Reserve Bank changes the quantity of money,there is an immediate effect on

Correct AnswerverifiedShow Answer

The opportunity cost of holding money is the

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The Australian dollar is called

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An official measure of money in Australia is M1,which includes the sum of

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The part of a bank's reserves that are larger than desired are called

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If the price level increases,the

Correct AnswerverifiedShow Answer

As a lender of last resort,the Reserve Bank

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As the opportunity cost of holding money increases,people can

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Money serves as a

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In the money market,in the short run if the quantity of money exceeds the quantity of money demanded,then to achieve equilibrium the

Correct AnswerverifiedShow Answer

If the currency drain ratio is 0.2 and the desired reserve ratio is 0.03,the money multiplier is

Correct AnswerverifiedShow Answer

When the Reserve Bank buys government securities,the immediate effect of the purchase is that banks'

Correct AnswerverifiedShow Answer

Open market operations are when the Reserve Bank buys or sells

Correct AnswerverifiedShow Answer

In order for any given commodity to be considered money,it has to

Correct AnswerverifiedShow Answer

In performing which of its primary functions does money solve the problem of the double coincidence of wants?

Correct AnswerverifiedShow Answer

A credit card is

Correct AnswerverifiedShow Answer

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As the nominal interest rate increases,the opportunity cost of holding money and the quantity of money demanded .

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